Tuesday, January 18

Eskom’s Choice: R300bn Environmental Compliance or 16,000MW Shutdown

With liquidity and debt problems, Eskom is now obliged to meet emission standards at a cost of R300 billion.

It’s either that or the immediate shutdown of 16,000 megawatts (MW) of coal and liquid fuel generation capacity, which is equivalent to more than half the generation capacity that Eskom had available during the afternoon peak of December 13. .

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“This would have a significant impact on the economy and employment, particularly in Mpumalanga and Lephalale, and would delay the country’s plans for a just energy transition to a cleaner electricity supply,” says Eskom.

The only other hope is an appeal to be decided in January.

Eskom said in a statement that it is appealing several rulings from the Department of Forestry, Fisheries and the Environment (DFFE).

The department rejected Eskom’s requests for postponement of compliance deadlines at the Matla, Duvha, Matimba, Medupi and Lethabo power plants.

The requests of Majuba, Tutuka, Kendal and Kriel were partially granted.

Grants were granted for the Grootvlei, Arnot, Hendrina, Camden, Komati coal stations and the Acacia and Port Rex peak stations. These are the oldest power plants, which will close in 2030. Komati will be the first to close its last unit at the end of next year and will be fully closed before 2025, says Eskom. Acacia and Port Rex will reach the end of their 50 years of life in 2026/27.

Eskom says that during 2019 and 2020 it requested the postponement or suspension of the regulations of the minimum emission standards (MES) under the National Environmental Management: Air Quality Law or the establishment of alternative limits in 16 of its power plants.

Read: Eskom: How do you stack up on contamination risks?

The requests followed broad public participation and were based, among others, on the following reasons:

  1. Eskom’s planned emissions reduction plan includes investing in technology upgrades to reduce emissions, phasing out older stations, and switching to a cleaner energy mix. These initiatives will result in a substantial reduction in emissions in the future. Particulate matter (PM), nitrogen oxides (NOx) and sulfur dioxide (SOtwo) will be reduced by 58%, 46% and 66% respectively by 2035. Carbon dioxide emissions will be reduced by 50% by 2035. These plans are in line with Eskom’s Just Energy Transition Strategy (JET) and the government’s policy objectives in terms of greenhouse gas reduction.
  2. The cost of full compliance with the MES is estimated at more than R300 billion and will not add any additional capacity to the national grid. If funds were available, and if it were possible to execute all compliance projects in time to meet requirements, these projects would add at least 10% to the existing electricity rate.
  3. There are additional “very significant” water requirements associated with the installation of emission reduction technology for SOtwo, which would increase Eskom’s current demand for water by 20%. This increased demand for water is not considered appropriate in a water-stressed country like South Africa.
  4. There are significant practical challenges in implementing the required updates within the legal timelines without causing national power capacity issues.
  5. Ambient air quality (as opposed to point source) must be improved in affected regions to limit the impact of air quality on the health of communities; however, apart from PM, the SOtwo and NOx ambient air quality standards are generally met. Therefore, decisions on the implementation of MES should preferably consider the full range of sustainable development issues rather than focus on smokestack / point source emissions.
  6. The DFFE issued its rulings at the end of October and communicated them to Eskom on November 4.

The disclosure by Eskom of this situation now, a month later, comes on the eve of the announcement of Eskom’s financial results for the first six months of the current financial year and in the context of a controversial application of fees.

Eskom maintains that it requested a 20.5% rate increase from March 1, but energy regulator Nersa says it could be much more.

Read: We want 20% more, says Eskom

According to Eskom, its rates do not reflect costs, and even with the 20.5% increase, it will be left with a deficit of R29 billion.

It has been filling the financing gap with loans, but its debt burden of around R400 billion is already far more than it can handle.

Independent energy expert Lungile Mashele said in a recent webinar hosted by EE Business Intelligence that lenders are concerned about Eskom’s deteriorating technical performance and rate confusion as clashes with Nersa regularly end in court.

Read: Nersa admits not having implemented the electricity tariff methodology

The utility company says it is collaborating with the DFFE, the Department of Public Enterprises, the Department of Mineral Resources and Energy “and others” on the way forward.


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